A homeowner has been offered three alternative mortgage loans to finance the pur

Question

A homeowner has been offered three alternative mortgage loans to finance the purchase of a $300,000 house. The interest rate on the first alternative is 8 percent for twenty-five years, and the loan requires a 20 percent down payment. The second mortgage loan is also for twenty-five years with an interest rate of 7 percent but requires a down payment of a third of the cost of the house. The third loan also requires a third down but is for 20 years at 6 percent. What are the annual mortgage payments required by each loan?

Explanation / Answer

ANSWER:

Annual Mortgage Payments are:

Loan 1: $ 2,40,000 X 8% = $ 19,200

Loan 2 : $ 2,00,000 X 7% = $ 14,000

Loan 3 : $ 2,00,000 x 6% = $ 12,000

Thanks

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